Top Nursing Home Therapy Provider to Pay $125 Million to Resolve False Claims Act Allegations

The Justice Department announced that contract therapy providers RehabCare Group Inc., RehabCare Group East Inc. and their parent, Kindred Healthcare Inc., will pay $125 million to resolve a government lawsuit alleging False Claims Act violations.

The providers allegedly knowingly caused skilled nursing facilities (SNFs) to submit false claims to Medicare for rehabilitation therapy services that were unreasonable, not necessary or skilled, or never even occurred.

RehabCare is the largest provider of therapy in the nation, contracting with more than 1,000 SNFs in 44 states to provide rehabilitation therapy to their patients.

“Medicare beneficiaries are entitled to receive care that is dictated by their clinical needs rather than the fiscal interests of healthcare providers,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “All providers, whether contractors or direct billers of taxpayer-funded federal healthcare programs, will be held accountable when their actions cause false claims for unnecessary services.”

The government argued in its complaint that RehabCare’s policies and practices were designed to achieve the highest reimbursement level possible regardless of the clinical needs of their patients, resulting in artificially and improperly inflated bills to Medicare. The government’s complaint listed a litany of issues with RehabCare’s schemes.

“The complaint outlines the extent and sophistication of this fraud, and the government’s continuing work to ensure that the provision of care in skilled nursing facilities is based on patients’ clinical needs,” said U.S. Attorney Carmen M. Ortiz for the District of Massachusetts.

“Health providers seeking to increase Medicare profits, rather than providing suitable, high-quality care, will be investigated and prosecuted,” said Inspector General Daniel R. Levinson for the U.S. Department of Health and Human Services (HHS). “Under our robust compliance agreement, an outside review organization will scrutinize a random sample of medical records annually to assess the medical necessity and reasonableness of therapy services provided by RehabCare.”

The Justice Department also announced settlements with four SNFs for their role in submitting false claims to Medicare.

The whistleblower allegations were originally brought forth by a physical therapist and occupational therapist who each worked for RehabCare, and they will receive $24 million as their qui tam, or whistleblower, share of the settlement under False Claims Act provisions.